Oracle reportedly has offered to set up a separate business for the open source MySQL database as a way to get the European Commission to approve the proposed Oracle-Sun deal.

In his eyeball-to-eyeball stare-down with the European Commission (EC) over MySQL, Oracle chairman Larry Ellison may have blinked.

Reports from multiple news agencies claim that Oracle is now willing to set up a separate business unit within the combined Oracle-Sun that would focus solely on MySQL's open source database business. The move is designed to soften the concerns of the EC about Oracle's potential abuse of a monopoly position with control over both the proprietary and open source database markets, and so bring a swift end to the EC's three-month-long investigation of the deal.

Reports say Oracle plans to present its proposal before its scheduled Dec. 10 hearing with the EC in Brussels. At that meeting, Oracle is to make its case that gaining control of MySQL will not limit competition in the database market, thereby reducing choice for European buyers.

In a story posted by Reuters, an Oracle spokeswoman said a story in the New York Post saying Oracle was about to pitch its proposal to the EC "was completely untrue."

Oracle's decision to initiate a compromise would come as something of a surprise given the decidedly uncompromising comments Ellison made less than a month ago, saying he planned to "vigorously oppose the European Commission's Statement of Objections" and that he was confident that Oracle would "obtain unconditional clearance of the transaction."

There were no specifics in the reports detailing exactly how a firewall would be set up between MySQL and the rest of the Oracle-Sun business, particularly Oracle's proprietary database business. Oracle is reportedly willing to establish a separate board of directors for the proposed entity overseeing MySQL's business. Analysts are somewhat divided on the merits of Oracle's reported new proposal. Some believe it to be a sound solution, while others think it is merely a half step and may raise even more questions with the EC, further delaying approval of the deal.

"If this is what they actually present to the EC, there is a risk it could muddy the waters in terms of whether this is in the best interests of antitrust concerns," said Dana Gardner, principal analyst with Inter-Arbor Solutions Inc. "If Oracle wants to get this deal done soon, it needs to present a cleaner, more definitive proposal. This seems like a half step to me."

By establishing even a separate business within Oracle-Sun, there would be nothing preventing Oracle from absorbing that entity back into the company.

"They [Oracle] could change their mind in six months and say, 'OK, that proposed board of directors is yanked back under the company's control.' This could be Oracle trying to have its cake and eat it too," Gardner said.

Other analysts believe the idea has merit and could play an important role in developing industry standards. "Making MySQL a separate entity with a separate board of directors would help keep the board independent in decision making on standards. However, there have been many cases where such standards as Java have been run inside companies with equal effectiveness," said Ray Wang, a partner with The Altimeter Group.

Wang added that he feels the EC is fighting the wrong battle in this confrontation with Oracle. He said with so many database options emerging for users, coupled with the offerings of archrivals IBM and Microsoft, the EC should be going after the vendors for the lack of third-party maintenance options.

Analysts note there is little or no successful precedent among high-tech companies for setting up an acquired company as a separate internal entity. Typically, such companies are set up as wholly owned subsidiaries. Gardner believes Oracle is simply asking for too much, and if its true priority is to compete as a full-blown hardware-software solutions provider with the likes of IBM, and if MySQL is the only thing preventing Oracle from becoming that provider, it should let go of MySQL.

"If Oracle is truly interested in becoming a full-service company that competes with IBM, they should not let the MySQL thing stand in their way," Gardner said. "It seems to me that MySQL is the tail wagging the larger Oracle-Sun dog."

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